Something as long-term as a pension system would benefit most if governments would just leave it alone. But no.
We will come to the point when each and every percent, penny, cent or zloty of our pension contribution goes to different places and if nothing else, the various admin costs eat it up.

Also what is the point of this permanent fine-tuning of the pension schemes? (Apart from robbing the piggy banks, Hungarian-style). I start to feel that the point is merely that no one should be able to understand the system and play it. Live and pay contributions according to the rules. That would be too unfair, right? Someone paying attention and calculating his pension in advance should not enjoy any benefit that a completely ignorant person would feel bad about. This is administrative egalitarianism.

10:24 pm January 4, 2011

Jan wrote:

@stop making laws for just a day, please

You appear to be talking at cross-purposes with Pani Malgorzata. She doesn’t seem to be opposing the direction of this pension reform. Only is she assuming technical problems that may arise mainly from bureaucracy.

I am, however, doubtful that private management will give higher net yields. While, as she says, “the state-run pension system’s history of poor management, financial and otherwise” is worrying the Poles, executives of private pension funds and their subcontractors as a management black box all together may rip off the eventual pensioners with virtually no government or public inspection no matter how much they give gross yields. The net yields by private funds could be both higher and lower than those by the state-run system. The most probable mentality of the private contractors is that they will try riskier deals in financial markets in an attempt of bringing in higher returns than the state-run system would, calculate the balance between the ambitiously expected returns they would bring in and the conservatively simulated returns the state-run system would, consider the balance as a gross margin at their discretion, and the executives and their counterparts at various subcontractors enjoy remunerations that would be unthinkably high for the executives at a state-run institution, where a Fannie May- or Enron-Style recklessness remains possible. Worse, the uncertainty of the riskier financial markets such as the stock market could cause ambitious private pension funds gross losses and thus harm the whole pension system. The government would then have to issue deficit-covering bonds to make up for the losses or, in the worst case, bail out some of the private firms. The state-run pillar, therefore, should remain the core of the whole pension system even though the yields are mediocre. This must be one of the main reasons why the Tusk administration is so keen on reforming then state-run system.

Even the yields at the state-run institution can be higher than will have been expected by the growth of national output, in which a steady economic and demographic development is the key rather than the stock market. The development contains factors that are not necessarily apt for prior calculations, because they relate to innovations and other non-statistical events. In other words, the future is not on a roulette table but on a mah-jong table. The mah-jong uncertainly stands side by side with the roulette uncertainty in this real world. Better keep a certain autonomous distance from the doctrine of the Washington Consensus, which neglects or ignores the former uncertainly probably due to the reason that everybody can guess. Once you’ve got the crux, the agenda is clear. Sure the current Polish team’s got it. Only might they need a bit more accountability so that you won’t get worried to such an unnecessary extent. Although they are even better in accountability than the Hungarian authorities, the Polish voters, naturally including you, appear even more demanding in this regard than their Hungarian counterparts.

Add a Comment

Error message

Name

We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

About Emerging Europe

Emerging Europe Real Time provides sharp analysis and insight into what’s making news in Central and Eastern Europe. Drawing on the expertise of our reporters in the Czech Republic, Hungary, Poland, Russia and Turkey, the site provides an inside track on economics, politics and business in this emerging part of the European continent.